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Alternative Funding Options for Houston's Small Businesses

Published May 20, 2020 by Julia McGowen

Since the onset of the COVID-19 pandemic, businesses of all sizes in nearly every sector are facing financial hardship brought on by the crisis. 

As the economy gradually reopens, local and state orders with restrictions on business operations have presented challenges for business continuity, especially for small to medium sized-enterprises. While legislators have made record emergency funds available through federally-backed programs, including the Small Business Administration’s (SBA) Economic Injury Disaster Loans and the Paycheck Protection Program (PPP) established by the CARES Act, access to that funding goes quickly and has proven difficult for many small businesses to attain. 

To address the growing concern of securing small business funding, three Houston financial experts joined a virtual Partnership Small Biz Matters Business Resource Group meeting to explain the programs and resources available to small businesses and nonprofits seeking capital to maintain business operations. 

Since COVID-19 struck, LiftFund has supported small businesses across more than a dozen states. The community development organization has provided more than 800 relief loans totaling $23 million in funding and nearly 200 small business grants totaling over $1.6 million.

Richard Gianni, Senior Executive Vice President of Micro-lending for LiftFund, explained its mission is to support small businesses who have limited access to traditional resources and provide financial support through funding partnerships with municipalities and community partners.

LiftFund is an SBA-approved PPP lender and has provided more than $4 million in PPP loans to Houston entrepreneurs. In addition to offering PPP loans, LiftFund has established additional COVID-19 relief funding, offering loans up to $50,000 with a favorable interest rate and a 120-day deferment period.

Gianni stressed that while capital and liquidity is imperative to business continuity, business acumen is equally important during a crisis. LiftFunds offers a variety of business support services, including virtual learning opportunities, individualized business support and an on-demand learning platform that offers tutorials around money, management and marketing. Gianni said that LiftFund’s business support programs help small businesses leverage capital and make strategic decisions that are critical to navigating turbulent times. 

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Greater Houston Community Foundation
In late March, the Greater Houston Community Foundation (GHCF), in partnership with the United Way of Greater Houston, established the Greater Houston COVID-19 Recovery Fund to support the region’s most vulnerable communities impacted by the pandemic.

Jennifer Touchet, Vice President of Personal & Family Philanthropy at GHCF, said the fund has raised $14 million dollars to provide nearly 30 grants to nonprofit organizations providing food assistance, rental assistance and counseling for disproportionately impacted communities in Harris, Fort Bed, Montgomery and Waller Counties. To date, $2.2 million has been granted. Additional nonprofit organization grants are expected to be released in late May. 

Touchet said in addition to directing philanthropic funds to organizations providing much-needed services for those affected by the crisis, the GHCF also provides critical dashboards that enable nonprofits providing these services to make data-based decisions based on what communities need most. The Nonprofit Needs Data Dashboard is an interactive platform that summarizes the services, needs and populations served of nearly 80 local nonprofits to help guide how money is allocated. The GHCF also provides a COVID-19 Nonprofit Inquiry Form for nonprofits to help other organizations understand the needs of households affected by COVID-19. These tools help other organizations and funders garner support for those disproportionately affected by the crisis. 

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NextSeed aims to build prosperous communities by making meaningful investments accessible to everyone and empowering everyday investors to invest directly in local businesses through crowdfunding. In response to the COVID-19 crisis, NextSeed launched The NextSeed Community Bridge Note, which offers flexible crowdfunded working capital financing for small businesses who are negatively impacted by the pandemic.

NextSeed’s Co-Head of Investment Banking, Jovan Vojvodic, said the SEC announced that it was providing temporary relief to expedite crowdfunding offerings earlier this Month, which typically calls for long campaign times and CPA-reviewed financial statements. Under these temporary changes to regulated crowdfunding offerings, campaigns only need to remain open for 48 hours and businesses are no longer required to provide third-party CPA-reviewed financials up to $250,000. The previous threshold was $107,000. These changes are in effect for offerings launched before August 31, 2020. 

Vojvodic said that by leveraging the SEC’s temporary relief, NextSeed is able to provide small businesses with an alternative to raise flexible, lower cost, lower fee financing to meet their working capital needs during and in the immediate aftermath of COVID-19. Vojvodic added that by investing in these notes, investors can participate in the recovery and the eventual return to growth of businesses they care about.

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The Partnership's Greater Houston Business Recovery Center provides businesses guidance on policy and financing related to recovery programs. Visit the Partnership's COVID-19 Resource page for updates, guidance for employers and more information.

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